Guns R Us overstated its ending inventory in the current year by $5,000. The company incorrectly reported $100,000 of net income. Explain the consequences of this error on the current period's income statement.

A. Cost of goods sold will be too high by $5,000.

B. Cost of goods sold will be too low by $5,000.

C. The correct net income amount should have been $105,000.

Question

Phoenix Massey

Business

10 November, 17:20

Guns R Us overstated its ending inventory in the current year by $5,000. The company incorrectly reported $100,000 of net income. Explain the consequences of this error on the current period's income statement.

A. Cost of goods sold will be too high by $5,000.

B. Cost of goods sold will be too low by $5,000.

C. The correct net income amount should have been $105,000.

+3

Answers (1)

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Siena Mcpherson · Answer 1

B. Cost of goods sold will be too low by $5,000.

Explanation:

Overstating inventory caused COGS to be too low, this cause net income to be too high.